DTE Energy Co Valuation – January 2019 $DTE

Company Profile (excerpt from Reuters): DTE Energy Company (DTE Energy), incorporated on January 26, 1995, is an energy company. The Company’s segments include Electric, Gas, Gas Storage and Pipelines, Power and Industrial Projects, Energy Trading, and Corporate and Other. DTE Energy’s utility operations consist of DTE Electric Company (DTE Electric) and DTE Gas Company (DTE Gas). DTE Energy also has three other segments that are engaged in a range of energy-related businesses. DTE Energy’s other businesses are involved in natural gas pipelines, gathering and storage; power and industrial projects, and energy marketing and trading operations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DTE – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,686,691,583 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 53.41% Pass
6. Moderate PEmg Ratio PEmg < 20 20.60 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.81 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.52
MG Growth Estimate 4.63%
MG Value $98.04
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $80.06
MG Value based on 0% Growth $46.93
Market Implied Growth Rate 6.05%
Current Price $113.72
% of Intrinsic Value 115.99%

DTE Energy Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $5.52 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.05% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into DTE Energy Co revealed the company was trading above its Graham Number of $84.39. The company pays a dividend of $3.36 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.6, which was below the industry average of 21.62, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-118.13.

DTE Energy Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$118.13
Graham Number $84.39
PEmg 20.60
Current Ratio 1.47
PB Ratio 1.94
Current Dividend $3.36
Dividend Yield 2.95%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,103,000,000
Total Current Liabilities $2,117,000,000
Long-Term Debt $13,620,000,000
Total Assets $35,292,000,000
Intangible Assets $3,157,000,000
Total Liabilities $24,602,000,000
Shares Outstanding (Diluted Average) 182,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.97
Dec2017 $6.32
Dec2016 $4.83
Dec2015 $4.05
Dec2014 $5.10
Dec2013 $3.76
Dec2012 $3.55
Dec2011 $4.18
Dec2010 $3.74
Dec2009 $3.24
Dec2008 $3.34
Dec2007 $5.70
Dec2006 $2.43
Dec2005 $3.05
Dec2004 $2.49
Dec2003 $2.50
Dec2002 $3.18
Dec2001 $1.44
Dec2000 $3.27
Dec1999 $3.33
Dec1998 $3.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.52
Dec2017 $5.14
Dec2016 $4.45
Dec2015 $4.21
Dec2014 $4.22
Dec2013 $3.75
Dec2012 $3.70
Dec2011 $3.86
Dec2010 $3.70
Dec2009 $3.64
Dec2008 $3.69
Dec2007 $3.66
Dec2006 $2.67
Dec2005 $2.70
Dec2004 $2.54
Dec2003 $2.63
Dec2002 $2.74

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Companies for the Defensive Dividend Stock Investor – June 2018
DTE Energy Co Valuation – March 2018 $DTE
DTE Energy Co Valuation – July 2016 $DTE
58 Companies in the Spotlight This Week – 1/31/15
5 Speculative and Overvalued Companies to Avoid – January 2015

Other ModernGraham posts about related companies

AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO
CenterPoint Energy Inc Valuation – January 2019 $CNP
CMS Energy Corp Valuation – January 2019 $CMS
Xcel Energy Inc Valuation – December 2018 $XEL
California Water Service Group Valuation – October 2018 $CWT
Canadian Utilities Ltd Valuation – September 2018 $TSE:CU

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

DTE Energy Co Valuation – March 2018 $DTE

Company Profile (excerpt from Reuters): DTE Energy Company (DTE Energy), incorporated on January 26, 1995, is an energy company. The Company’s segments include Electric, Gas, Gas Storage and Pipelines, Power and Industrial Projects, Energy Trading, and Corporate and Other. DTE Energy’s utility operations consist of DTE Electric Company (DTE Electric) and DTE Gas Company (DTE Gas). DTE Energy also has three other segments that are engaged in a range of energy-related businesses. DTE Energy’s other businesses are involved in natural gas pipelines, gathering and storage; power and industrial projects, and energy marketing and trading operations.

DTE Chart

DTE data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DTE – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,134,129,375 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.10 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 51.25% Pass
6. Moderate PEmg Ratio PEmg < 20 18.58 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.90 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 45.29 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.44
MG Growth Estimate 4.34%
MG Value $93.53
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $78.90
MG Value based on 0% Growth $46.25
Market Implied Growth Rate 5.04%
Current Price $101.09
% of Intrinsic Value 108.08%

DTE Energy Co qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $5.44 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into DTE Energy Co revealed the company was trading above its Graham Number of $82.68. The company pays a dividend of $3.36 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.58, which was below the industry average of 24.93, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-118.29.

DTE Energy Co performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$118.29
Graham Number $82.68
PEmg 18.58
Current Ratio 1.10
PB Ratio 1.90
Current Dividend $3.36
Dividend Yield 3.32%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $3,081,000,000
Total Current Liabilities $2,812,000,000
Long-Term Debt $12,184,000,000
Total Assets $33,767,000,000
Intangible Assets $3,160,000,000
Total Liabilities $24,255,000,000
Shares Outstanding (Diluted Average) 179,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.73
Dec2017 $6.32
Dec2016 $4.83
Dec2015 $4.05
Dec2014 $5.10
Dec2013 $3.76
Dec2012 $3.55
Dec2011 $4.18
Dec2010 $3.74
Dec2009 $3.24
Dec2008 $3.34
Dec2007 $5.70
Dec2006 $2.43
Dec2005 $3.05
Dec2004 $2.49
Dec2003 $2.50
Dec2002 $3.18
Dec2001 $1.44
Dec2000 $3.27
Dec1999 $3.33
Dec1998 $3.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.44
Dec2017 $5.14
Dec2016 $4.45
Dec2015 $4.21
Dec2014 $4.22
Dec2013 $3.75
Dec2012 $3.70
Dec2011 $3.86
Dec2010 $3.70
Dec2009 $3.64
Dec2008 $3.69
Dec2007 $3.66
Dec2006 $2.67
Dec2005 $2.70
Dec2004 $2.54
Dec2003 $2.63
Dec2002 $2.74

Recommended Reading:

Other ModernGraham posts about the company

DTE Energy Co Valuation – July 2016 $DTE
58 Companies in the Spotlight This Week – 1/31/15
5 Speculative and Overvalued Companies to Avoid – January 2015
DTE Energy Holding Company Annual Valuation – 2015 $DTE
14 Companies in the Spotlight This Week – 10/11/14

Other ModernGraham posts about related companies

FirstEnergy Corp Valuation – March 2018 $FE
Edison International Valuation – March 2018 $EIX
WEC Energy Group Inc Valuation – March 2018 $WEC
CenterPoint Energy Inc Valuation – March 2018 $CNP
Southern Co Valuation – March 2018 $SO
CMS Energy Corp Valuation – March 2018 $CMS
SCANA Corp Valuation – March 2018 $SCG
Xcel Energy Inc Valuation – February 2018 $XEL
Atmos Energy Corp Valuation – Initial Coverage $ATO
PNM Resources Inc Valuation – Initial Coverage $PNM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

DTE Energy Co Valuation – July 2016 $DTE

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how DTE Energy Co (DTE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): DTE Energy Company (DTE Energy) is a diversified energy company. DTE Energy’s utility operations consist primarily of DTE Electric Company (DTE Electric) and DTE Gas Company (DTE Gas). The Company’s segments include Electric, Gas, Gas Storage and Pipelines, Power and Industrial Projects, Energy Trading, and Corporate and Other. The Company’s Electric segment consists of DTE Electric, which is engaged in the generation, purchase, distribution and sale of electricity to approximately 2.2 million residential, commercial and industrial customers in southeastern Michigan. DTE Energy’s Gas segment consists principally of DTE Gas, a natural gas utility engaged in the purchase, storage, transportation, distribution and sale of natural gas to approximately 1.2 million residential, commercial and industrial customers throughout Michigan, and the sale of storage and transportation capacity. DTE Electric owns and operates approximately 680 distribution substations.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DTE – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,495,429,983 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.07 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 14.23% Fail
6. Moderate PEmg Ratio PEmg < 20 21.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.98 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.07 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 57.24 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

DTE value chart July 2016

EPSmg $4.47
MG Growth Estimate 3.12%
MG Value $65.88
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $64.83
MG Value based on 0% Growth $38.01
Market Implied Growth Rate 6.67%
Current Price $97.68
% of Intrinsic Value 148.26%

DTE Energy Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.7 in 2012 to an estimated $4.47 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

DTE Energy Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

DTE charts July 2016

Net Current Asset Value (NCAV) -$96.19
Graham Number $73.89
PEmg 21.85
Current Ratio 1.07
PB Ratio 1.98
Current Dividend $2.88
Dividend Yield 2.95%
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,362,000,000
Total Current Liabilities $2,209,000,000
Long-Term Debt $8,758,000,000
Total Assets $28,564,000,000
Intangible Assets $2,108,000,000
Total Liabilities $19,677,000,000
Shares Outstanding (Diluted Average) 180,000,000

Earnings Per Share History

Next Fiscal Year Estimate $4.90
Dec2015 $4.05
Dec2014 $5.10
Dec2013 $3.76
Dec2012 $3.55
Dec2011 $4.18
Dec2010 $3.74
Dec2009 $3.24
Dec2008 $3.36
Dec2007 $5.70
Dec2006 $2.43
Dec2005 $3.05
Dec2004 $2.49
Dec2003 $3.09
Dec2002 $3.83
Dec2001 $2.16
Dec2000 $3.27
Dec1999 $3.33
Dec1998 $3.05
Dec1997 $2.88
Dec1996 $2.13

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.47
Dec2015 $4.21
Dec2014 $4.22
Dec2013 $3.75
Dec2012 $3.70
Dec2011 $3.87
Dec2010 $3.70
Dec2009 $3.64
Dec2008 $3.70
Dec2007 $3.70
Dec2006 $2.79
Dec2005 $2.95
Dec2004 $2.93
Dec2003 $3.14
Dec2002 $3.15
Dec2001 $2.86
Dec2000 $3.11

Recommended Reading:

Other ModernGraham posts about the company

58 Companies in the Spotlight This Week – 1/31/15
5 Speculative and Overvalued Companies to Avoid – January 2015
DTE Energy Holding Company Annual Valuation – 2015 $DTE
14 Companies in the Spotlight This Week – 10/11/14
DTE Energy Holding Company Quarterly Stock Valuation – October 2014 $DTE

Other ModernGraham posts about related companies

AES Corporation Valuation – July 2016 $AES
FirstEnergy Corp Valuation – July 2016 $FE
Edison International Valuation – July 2016 $EIX
WEC Energy Group Inc Valuation – June 2016 $WEC
CenterPoint Energy Inc Valuation – June 2016 $CNP
Southern Company Valuation – June 2016 $SO
CMS Energy Corp Valuation – June 2016 $CMS
Xcel Energy Inc Valuation – May 2016 $XEL
PPL Corporation Valuation – January 2016 Update $PPL
Entergy Corp Valuation – January 2016 Update $ETR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

DTE Energy Holding Company Annual Valuation – 2015 $DTE

dte-logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how DTE Energy Holding Company (DTE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): DTE Energy Co. (DTE) is an energy company. The Company operates in four segments: Electric, Gas, Non-utility Operations, and Corporate and others. The Company’s utility operations consist primarily of DTE Electric and DTE Gas. DTE Electric is engaged in the generation, purchase, distribution and sale of electricity to customers. DTE Gas is engaged in the purchase, storage, transportation, distribution and sale of natural gas to customers, and the sale of storage and transportation capacity. Gas Storage and Pipelines consists of natural gas pipelines, gathering and storage businesses. Power and Industrial Projects consists of projects that deliver energy and utility-type products and services to industrial, commercial and institutional customers. Energy Trading consists of energy marketing and trading operations. Corporate and other includes various holding company activities, holds certain non-utility debt and energy-related investments.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $91.24
MG Value $41.96
MG Opinion Overvalued
Value Based on 3% Growth $57.41
Value Based on 0% Growth $33.65
Market Implied Growth Rate 7.27%
Net Current Asset Value (NCAV) -$87.30
PEmg 23.04
Current Ratio 0.98
PB Ratio 1.98

Balance Sheet – September 2014

Current Assets $2,755,000,000
Current Liabilities $2,805,000,000
Total Debt $7,909,000,000
Total Assets $26,376,000,000
Intangible Assets $2,126,000,000
Total Liabilities $18,207,000,000
Outstanding Shares 177,000,000

Earnings Per Share

2014 (estimate) $4.32
2013 $3.76
2012 $3.55
2011 $4.18
2010 $3.74
2009 $3.24
2008 $3.34
2007 $5.70
2006 $2.43
2005 $3.05
2004 $2.49

Earnings Per Share – ModernGraham

2014 (estimate) $3.96
2013 $3.75
2012 $3.70
2011 $3.86
2010 $3.70
2009 $3.64

Dividend History

Conclusion:

DTE Energy Holding Company is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.70 in 2010 to an estimated $3.96 for 2014.  This level of growth does not support the market’s implied estimate of 7.27% growth, leading the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

Be sure to check out previous ModernGraham valuations of DTE Energy Holding Company (DTE) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on DTE Energy Holding Company (DTE)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in DTE Energy Holding Company (DTE) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

DTE Energy Holding Company Quarterly Stock Valuation – October 2014 $DTE

dte-logoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how DTE Energy Holding Co. (DTE) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): DTE Energy Company (DTE Energy) , is a diversified energy company. The Company is engaged in utility operations consist primarily of Detroit Edison and MichCon. The Electric Utility segment consists principally of Detroit Edison. The Gas Utility segment consists of MichCon and Citizens. Its non-utility operations include Gas Storage and Pipelines. Unconventional Gas Production is engaged in unconventional gas and oil project development and production. Power and Industrial Projects consists of projects that deliver energy and utility-type products and services to industrial, commercial and institutional customers; provide coal transportation and marketing, and sell electricity from biomass-fired energy projects. Energy Trading consists of energy marketing and trading operations. Corporate and Other includes various holding company activities and holds certain non-utility debt and energy-related investments.
DTE Chart

DTE data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $77.02
MG Value $68.88
MG Opinion Overvalued
Value Based on 3% Growth $58.98
Value Based on 0% Growth $34.57
Market Implied Growth Rate 5.22%
Net Current Asset Value (NCAV) -$87.34
PEmg 18.94
Current Ratio 0.97
PB Ratio 1.70

Balance Sheet – 6/30/2014

Current Assets $2,721,000,000
Current Liabilities $2,819,000,000
Total Debt $7,813,000,000
Total Assets $26,189,000,000
Intangible Assets $2,130,000,000
Total Liabilities $18,181,000,000
Outstanding Shares 177,000,000

Earnings Per Share

2014 (estimate) $4.65
2013 $3.76
2012 $3.88
2011 $3.67
2010 $3.74
2009 $3.24
2008 $2.73
2007 $2.66
2006 $2.45
2005 $3.27
2004 $2.55

Earnings Per Share – ModernGraham

2014 (estimate) $4.07
2013 $3.74
2012 $3.63
2011 $3.41
2010 $3.17
2009 $2.88

Dividend History
DTE Dividend Chart

DTE Dividend data by YCharts

Conclusion:

DTE Energy is suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor’s only concern is the low current ratio and the company qualifies for Enterprising Investors by default despite concerns regarding the company’s level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.17 in 2010 to an estimated $4.07 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 5.22% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on DTE Energy Holding Co. (DTE)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in DTE Energy Holding Co. (DTE) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

American Water Works Co Inc Valuation – March 2019 #AWK

Company Profile (excerpt from Reuters): American Water Works Company, Inc., incorporated on August 28, 1936, is a holding company for regulated and market-based subsidiaries throughout the United States and Ontario, Canada. The Company’s Regulated Businesses segment provided water and wastewater services as public utilities in 16 states in the United States as of December 31, 2016. The Market-Based Businesses consists of four segments, including Military Services Group, which conducts operation and maintenance (O&M) of water and wastewater systems for military bases; Contract Operations Group, which conducts O&M of water and wastewater facilities for municipalities and the food and beverage industry; Homeowner Services Group, which primarily provides water and sewer line protection plans for homeowners, and Keystone, which provides water services for natural gas exploration and production companies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AWK – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $19,002,457,263 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.37 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 71.64% Pass
6. Moderate PEmg Ratio PEmg < 20 34.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.28 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.76 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.02
MG Growth Estimate 4.70%
MG Value $54.13
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $43.86
MG Value based on 0% Growth $25.71
Market Implied Growth Rate 13.13%
Current Price $105.13
% of Intrinsic Value 194.23%

American Water Works Company Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.3 in 2015 to an estimated $3.02 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.13% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into American Water Works Company Inc revealed the company was trading above its Graham Number of $50.93. The company pays a dividend of $1.78 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 34.76, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-79.66.

American Water Works Company Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$79.66
Graham Number $50.93
PEmg 34.76
Current Ratio 0.37
PB Ratio 3.28
Current Dividend $1.78
Dividend Yield 1.69%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $781,000,000
Total Current Liabilities $2,094,000,000
Long-Term Debt $7,569,000,000
Total Assets $21,223,000,000
Intangible Assets $1,659,000,000
Total Liabilities $15,359,000,000
Shares Outstanding (Diluted Average) 183,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.55
Dec2018 $3.15
Dec2017 $2.38
Dec2016 $2.62
Dec2015 $2.64
Dec2014 $2.35
Dec2013 $2.06
Dec2012 $2.01
Dec2011 $1.75
Dec2010 $1.53
Dec2009 -$1.39
Dec2008 -$3.52
Dec2007 -$2.14
Dec2006 -$1.01
Dec2005 -$2.03
Dec2001 $1.61
Dec2000 $1.61
Dec1999 $1.40
Dec1998 $1.54
Dec1997 $1.42
Dec1996 $1.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.02
Dec2018 $2.72
Dec2017 $2.47
Dec2016 $2.46
Dec2015 $2.30
Dec2014 $2.07
Dec2013 $1.68
Dec2012 $1.02
Dec2011 $0.10
Dec2010 -$0.92
Dec2009 -$2.10
Dec2008 -$2.11
Dec2007 -$1.07
Dec2006 -$0.25
Dec2005 $0.36
Dec2001 $1.55
Dec2000 $1.49

Recommended Reading:

Other ModernGraham posts about the company

American Water Works Co Inc Valuation – June 2018 $AWK
American Water Works Company Inc Valuation – Initial Coverage $AWK

Other ModernGraham posts about related companies

Alliant Energy Corp Valuation – March 2019 #LNT
Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Alliant Energy Corp Valuation – March 2019 #LNT

Company Profile (excerpt from Reuters): Alliant Energy Corporation (Alliant Energy), incorporated on April 22, 1981, operates as a utility holding company. The Company’s segments include Utility and Non-regulated, Parent and Other. The Utility segment includes the operations of Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL), which serve retail customers in Iowa and Wisconsin. The Utility segment includes utility electric operations, utility gas operations and utility other, which includes steam operations and the unallocated portions of the utility business. The Company’s Non-regulated, Parent and Other segment includes the operations of Alliant Energy Resources, LLC (Resources) and its subsidiaries; Alliant Energy Corporate Services, Inc. (Corporate Services); the Alliant Energy parent company, and any Alliant Energy parent company consolidating adjustments. As of December 31, 2016, the Company was focused on providing regulated electric and natural gas service to approximately 960,000 electric and approximately 410,000 natural gas customers in the Midwest through its two public utility subsidiaries, IPL and WPL.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LNT – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,189,931,660 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 55.77% Pass
6. Moderate PEmg Ratio PEmg < 20 23.05 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.33 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -6.11 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.06
MG Growth Estimate 3.94%
MG Value $33.68
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $29.81
MG Value based on 0% Growth $17.48
Market Implied Growth Rate 7.28%
Current Price $47.40
% of Intrinsic Value 140.75%

Alliant Energy Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $2.06 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.28% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Alliant Energy Corporation revealed the company was trading above its Graham Number of $31.22. The company pays a dividend of $1.34 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 23.05, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.81.

Alliant Energy Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.81
Graham Number $31.22
PEmg 23.05
Current Ratio 0.48
PB Ratio 2.33
Current Dividend $1.34
Dividend Yield 2.83%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $785,100,000
Total Current Liabilities $1,644,100,000
Long-Term Debt $5,246,300,000
Total Assets $15,426,000,000
Intangible Assets $0
Total Liabilities $10,640,300,000
Shares Outstanding (Diluted Average) 235,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.23
Dec2018 $2.19
Dec2017 $1.99
Dec2016 $1.64
Dec2015 $1.68
Dec2014 $1.73
Dec2013 $1.62
Dec2012 $1.45
Dec2011 $1.37
Dec2010 $1.30
Dec2009 $0.51
Dec2008 $1.31
Dec2007 $1.89
Dec2006 $1.35
Dec2005 -$0.04
Dec2004 $0.64
Dec2003 $0.91
Dec2002 $0.59
Dec2001 $1.07
Dec2000 $2.52
Dec1999 $1.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.06
Dec2018 $1.93
Dec2017 $1.78
Dec2016 $1.65
Dec2015 $1.63
Dec2014 $1.57
Dec2013 $1.40
Dec2012 $1.26
Dec2011 $1.20
Dec2010 $1.17
Dec2009 $1.07
Dec2008 $1.25
Dec2007 $1.13
Dec2006 $0.73
Dec2005 $0.49
Dec2004 $0.88
Dec2003 $1.09

Recommended Reading:

Other ModernGraham posts about the company

Alliant Energy Corp Valuation – June 2018 $LNT
Alliant Energy Corp Valuation – Initial Coverage $LNT

Other ModernGraham posts about related companies

Consolidated Edison Inc Valuation – March 2019 #ED
Duke Energy Corp Valuation – March 2019 #DUK
Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Consolidated Edison Inc Valuation – March 2019 #ED

Company Profile (excerpt from Reuters): Consolidated Edison, Inc. (Con Edison), incorporated on September 3, 1997, is a holding company. The Company operates through its subsidiaries, which include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), Con Edison Clean Energy Businesses, Inc. (the Clean Energy Businesses) and Con Edison Transmission, Inc. (Con Edison Transmission). CECONY’s principal business operations are its regulated electric, gas and steam delivery businesses. O&R’s principal business operations are its regulated electric and gas delivery businesses. The Clean Energy Businesses develop, own and operate renewable and energy infrastructure projects and provide energy-related products and services to wholesale and retail customers. Con Edison Transmission, through its subsidiaries, invests in electric and gas transmission projects.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ED – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $27,410,352,908 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.62 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 22.57% Fail
6. Moderate PEmg Ratio PEmg < 20 19.77 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.60 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.62 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.47 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.32
MG Growth Estimate 1.99%
MG Value $53.88
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $62.63
MG Value based on 0% Growth $36.71
Market Implied Growth Rate 5.64%
Current Price $85.40
% of Intrinsic Value 158.49%

Consolidated Edison, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.81 in 2015 to an estimated $4.32 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Consolidated Edison, Inc. revealed the company was trading above its Graham Number of $69.52. The company pays a dividend of $2.86 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.77, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-105.15.

Consolidated Edison, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$105.15
Graham Number $69.52
PEmg 19.77
Current Ratio 0.62
PB Ratio 1.60
Current Dividend $2.86
Dividend Yield 3.35%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,864,000,000
Total Current Liabilities $6,207,000,000
Long-Term Debt $17,495,000,000
Total Assets $53,920,000,000
Intangible Assets $2,094,000,000
Total Liabilities $37,081,000,000
Shares Outstanding (Diluted Average) 315,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.00
Dec2018 $4.42
Dec2017 $4.94
Dec2016 $4.12
Dec2015 $4.05
Dec2014 $3.71
Dec2013 $3.61
Dec2012 $3.86
Dec2011 $3.57
Dec2010 $3.47
Dec2009 $3.14
Dec2008 $4.37
Dec2007 $3.47
Dec2006 $2.95
Dec2005 $2.94
Dec2004 $2.27
Dec2003 $2.38
Dec2002 $3.02
Dec2001 $3.21
Dec2000 $2.74
Dec1999 $3.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.32
Dec2018 $4.40
Dec2017 $4.29
Dec2016 $3.93
Dec2015 $3.81
Dec2014 $3.68
Dec2013 $3.62
Dec2012 $3.64
Dec2011 $3.56
Dec2010 $3.53
Dec2009 $3.50
Dec2008 $3.52
Dec2007 $2.99
Dec2006 $2.74
Dec2005 $2.68
Dec2004 $2.61
Dec2003 $2.81

Recommended Reading:

Other ModernGraham posts about the company

Consolidated Edison Inc Valuation – June 2018 $ED
Consolidated Edison Inc Valuation – February 2017 $ED
Consolidated Edison Inc Valuation – August 2016 $ED
Consolidated Edison Analysis – 2015 Update $ED
21 Companies in the Spotlight This Week – June 14, 2014

Other ModernGraham posts about related companies

Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Duke Energy Corp Valuation – March 2019 #DUK

Company Profile (excerpt from Reuters): Duke Energy Corporation (Duke Energy), incorporated on May 3, 2005, is an energy company. The Company operates through three segments: Electric Utilities and Infrastructure; Gas Utilities and Infrastructure, and Commercial Renewables. The Company operates in the United States through its direct and indirect subsidiaries. The Company’s subsidiaries include Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DUK – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $65,576,389,981 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 31.52% Fail
6. Moderate PEmg Ratio PEmg < 20 21.51 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.48 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.19
MG Growth Estimate 3.09%
MG Value $61.57
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $60.79
MG Value based on 0% Growth $35.64
Market Implied Growth Rate 6.51%
Current Price $90.20
% of Intrinsic Value 146.50%

Duke Energy Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $3.48 in 2015 to an estimated $4.19 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.51% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Duke Energy Corp revealed the company was trading above its Graham Number of $81.52. The company pays a dividend of $3.64 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.51, which was below the industry average of 23.71, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-128.09.

Duke Energy Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$128.09
Graham Number $81.52
PEmg 21.51
Current Ratio 0.65
PB Ratio 1.48
Current Dividend $3.64
Dividend Yield 4.03%
Number of Consecutive Years of Dividend Growth 11

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,714,000,000
Total Current Liabilities $15,041,000,000
Long-Term Debt $50,788,000,000
Total Assets $145,392,000,000
Intangible Assets $19,303,000,000
Total Liabilities $101,558,000,000
Shares Outstanding (Diluted Average) 717,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.90
Dec2018 $3.76
Dec2017 $4.36
Dec2016 $3.11
Dec2015 $4.05
Dec2014 $2.66
Dec2013 $3.76
Dec2012 $3.07
Dec2011 $3.83
Dec2010 $3.00
Dec2009 $2.49
Dec2008 $3.21
Dec2007 $3.54
Dec2006 $4.71
Dec2005 $11.28
Dec2004 $4.62
Dec2003 -$4.44
Dec2002 $3.66
Dec2001 $7.32
Dec2000 $7.14
Dec1999 $6.09

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.19
Dec2018 $3.76
Dec2017 $3.70
Dec2016 $3.35
Dec2015 $3.48
Dec2014 $3.21
Dec2013 $3.40
Dec2012 $3.19
Dec2011 $3.24
Dec2010 $3.09
Dec2009 $3.77
Dec2008 $4.77
Dec2007 $5.01
Dec2006 $5.15
Dec2005 $5.08
Dec2004 $2.54
Dec2003 $2.32

Recommended Reading:

Other ModernGraham posts about the company

Most Undervalued Stocks of the S&P 500 – August 2018
Duke Energy Corp Valuation – May 2018 $DUK
Duke Energy Corp Valuation – February 2017 $DUK
Duke Energy Corporation Valuation – November 2015 Update $DUK
30 Companies in the Spotlight This Week – 11/15/14

Other ModernGraham posts about related companies

Sempra Energy Valuation – March 2019 #SRE
Ameren Corp Valuation – March 2019 #AEE
NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Sempra Energy Valuation – March 2019 #SRE

Company Profile (excerpt from Reuters): Sempra Energy, incorporated on October 11, 1996, is a holding company. The Company’s principal operating units are Sempra Utilities, which includes its San Diego Gas & Electric Company (SDG&E), Southern California Gas Company (SoCalGas) and Sempra South American Utilities segments, and Sempra Infrastructure, which includes its Sempra Mexico, Sempra Renewables and Sempra LNG & Midstream segments. As of December 31, 2016, SDG&E’s service area covered 4,100 square miles.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SRE – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $33,514,994,996 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.48 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -13.25% Fail
6. Moderate PEmg Ratio PEmg < 20 29.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.48 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.57 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.15
MG Growth Estimate -1.64%
MG Value $21.70
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $60.18
MG Value based on 0% Growth $35.28
Market Implied Growth Rate 10.48%
Current Price $122.30
% of Intrinsic Value 563.67%

Sempra Energy does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.66 in 2015 to an estimated $4.15 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.48% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Sempra Energy revealed the company was trading above its Graham Number of $84.66. The company pays a dividend of $3.58 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 29.47, which was above the industry average of 23.71. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-136.52.

Sempra Energy scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$136.52
Graham Number $84.66
PEmg 29.47
Current Ratio 0.48
PB Ratio 1.76
Current Dividend $3.58
Dividend Yield 2.93%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $3,645,000,000
Total Current Liabilities $7,523,000,000
Long-Term Debt $21,611,000,000
Total Assets $60,638,000,000
Intangible Assets $2,645,000,000
Total Liabilities $41,390,000,000
Shares Outstanding (Diluted Average) 276,476,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.85
Dec2018 $3.42
Dec2017 $1.01
Dec2016 $5.46
Dec2015 $5.37
Dec2014 $4.63
Dec2013 $4.01
Dec2012 $3.48
Dec2011 $5.51
Dec2010 $2.86
Dec2009 $4.52
Dec2008 $4.43
Dec2007 $4.16
Dec2006 $5.38
Dec2005 $3.65
Dec2004 $0.92
Dec2003 $3.03
Dec2002 $2.87
Dec2001 $2.52
Dec2000 $2.06
Dec1999 $1.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.15
Dec2018 $3.53
Dec2017 $3.75
Dec2016 $4.94
Dec2015 $4.66
Dec2014 $4.23
Dec2013 $4.05
Dec2012 $4.10
Dec2011 $4.37
Dec2010 $3.96
Dec2009 $4.48
Dec2008 $4.21
Dec2007 $3.88
Dec2006 $3.55
Dec2005 $2.62
Dec2004 $2.16
Dec2003 $2.66

Recommended Reading:

Other ModernGraham posts about the company

Sempra Energy Valuation – May 2018 $SRE
Sempra Energy Valuation – February 2017 $SRE
Sempra Energy Valuation – October 2015 Update $SRE
Sempra Energy Annual Valuation – October 2014 $SRE

Other ModernGraham posts about related companies

NextEra Energy Inc Valuation – February 2019 $NEE
Dominion Energy Inc Valuation – February 2019 $D
Exelon Corp Valuation – January 2019 $EXC
NRG Energy Inc Valuation – January 2019 $NRG
DTE Energy Co Valuation – January 2019 $DTE
AES Corp Valuation – January 2019 $AES
FirstEnergy Corp Valuation – January 2019 $FE
Edison International Valuation – January 2019 $EIX
WEC Energy Group Inc Valuation – January 2019 $WEC
Southern Co Valuation – January 2019 $SO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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